EarthLink said Tuesday that it is pulling the plug on its citywide Wi-Fi network in Philadelphia.

EarthLink issued a press release on Tuesday stating that it was unable to find a buyer for the $17 million network that has been 80 percent completed. It also claimed that after months of negotiations with the city and a nonprofit group interested in running the network, it was unable to close the deal.

Chris Putala, a spokesman for EarthLink wouldn't identify the nonprofit group. But a Philadelphia Inquirer article named the nonprofit as Cleveland-based OneCommunity, an organization that provides a fiber network to public and nonprofit institutions in Ohio.

EarthLink claims it had offered to donate the network free of charge to OneCommunity as well as pay cash and donate new Wi-Fi equipment, but the "transfer unraveled due to unresolved issues among the city, Wireless Philadelphia and the nonprofit."

OneCommunity was not available for comment.

Mayor Michael Nutter told The Philadelphia Inquirer that he was "disappointed" by EarthLink's decision. He indicated that the city might still hold the company accountable to some of the financial obligations in the 10-year contract it signed two years ago. But he acknowledged that it was highly unlikely that another network operator would take over the network at this point.

"The business model was tenuous at best," he told The Inquirer. "I think what we have here is a market going in a different direction."

EarthLink is giving its nearly 6,000 customers in Philadelphia 30 days to transition to other services before it shuts down the network. Service will be terminated on June 12. The roughly 900 subscribers who were getting service subsidized as part of a "digital inclusion" program will be offered free EarthLink dial-up service for a year, EarthLink's Putala said.

Last month, it announced it had transferred ownership of its networks to cities themselves in Corpus Christi, Texas, and Milpitas, Calif. But in New Orleans, where no agreement was reached with the city, it shut down service.

As for the Philadelphia network, EarthLink has already filed a proceeding in federal court to start removing Wi-Fi radios from city street lights and cap its potential liability at $1 million.

"Since we have exhausted our efforts to find a new owner of the network, our only responsible alternative now is to remove our network at our cost and assist our Wi-Fi customers with alternative ways to access the Internet," Rolla Huff, EarthLink's chairman and chief executive officer, said in a statement.

In its court filing, EarthLink said that its subscriber base covered less than 50 percent of its operational costs to run the Philadelphia network. And the company disclosed that it has been losing between $180,000 and $200,000 per month on the network.

"The losses were simply not sustainable," Putala said. "EarthLink had every incentive to make this network work. Despite our best efforts the Wi-Fi industry just didn't live up to our expectations."

While it's clear that the citywide Wi-Fi experiment has left EarthLink with some financial loss, the citizens of Philadelphia are also losing something. The network, which was dreamed up nearly four years ago, was supposed to bring more broadband competition and affordable service to the community. A major component of the network was to also provide free or low-cost broadband service to low-income families in an effort to bridge the digital divide.

And before the service was even really off the ground, EarthLink pulled the plug. Still, Wireless Philadelphia, the nonprofit created to support the digital inclusion part of the service, said it isn't giving up hope.

"Despite today's announcement, Wireless Philadelphia and the city are still working actively together to identify alternatives for preserving this network and applying it to numerous civic, commercial, and social purposes," Greg Goldman, CEO of Wireless Philadelphia said in a statement. "Regardless, Wireless Philadelphia is utterly steadfast in its determination to extend Internet access to all members of the community, and we intend to do everything in our power to continue the momentum generated by WP in support of digital inclusion."

About the author

Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie.
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